sales from reported to like-for-like
DESCRIPTION
Sales from reported to like-for-like. Sales by company (reported). Sales by company (like-for-like). Sales by geographic regions (reported). From sales to recurring operating income. Recurring operating income by company (reported). Recurring operating income by company (like-for-like). - PowerPoint PPT PresentationTRANSCRIPT
1
2
SalesSalesfrom reported to like-for-likefrom reported to like-for-like
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007
ChangeChange
SALES SALES (reported)(reported) 303.8303.8 365.7365.7 + 20.4 %+ 20.4 %
Currency translation impact ($ and £)Currency translation impact ($ and £) 0.80.8 16.016.0
Changes in consolidation scopeChanges in consolidation scope
SALES SALES
(like-for-like)(like-for-like)
304.6304.6 381.7381.7 + 25.3 %+ 25.3 %
Sales by companySales by company(reported)(reported)
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007 ChangeChange
FITCHFITCH GROUP GROUP 303.8303.8 365.7365.7 + 20.4 %+ 20.4 %
Fitch RatingsFitch Ratings 255.9255.9 313.3313.3 + 22.4 %+ 22.4 %
AlgorithmicsAlgorithmics 47.947.9 52.452.4 + 9.4 %+ 9.4 %
SALES SALES
(reported)(reported)
303.8303.8 365.7365.7 + 20.4 %+ 20.4 %
Sales by company Sales by company (like-for-like)(like-for-like)
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007 ChangeChange
FITCHFITCH GROUP GROUP 304.6304.6 381.7381.7 + 25.3 % + 25.3 %
Fitch RatingsFitch Ratings 256.3256.3 325.1325.1 + 26.8 %+ 26.8 %
AlgorithmicsAlgorithmics 48.348.3 56.656.6 + 17.2 %+ 17.2 %
SALES SALES
(like-for-like)(like-for-like)
304.6304.6 381.7381.7 + 25.3 %+ 25.3 %
First half 2005/2006 %%
First half
2006/2007 %%
11 USAUSA 154.2154.2 50.850.8 %% 178.5178.5 48.848.8 %%
22 UKUK 43.343.3 14.314.3 %% 53.253.2 14.614.6 %%
33 GermanyGermany 11.011.0 3.63.6 %% 13.813.8 3.83.8 %%
44 NetherlandsNetherlands 7.37.3 2.42.4 %% 10.410.4 2.82.8 %%
55 JapanJapan 5.75.7 1.91.9 %% 8.98.9 2.42.4 %%
66 ItalyItaly 7.37.3 2.42.4 %% 8.68.6 2.42.4 %%
77 SpainSpain 5.85.8 1.91.9 %% 8.38.3 2.32.3 %%
88 FranceFrance 6.16.1 2.02.0 %% 8.18.1 2.22.2 %%
99 SwitzerlandSwitzerland 6.56.5 2.12.1 %% 6.76.7 1.81.8 %%
1010 IrelandIreland 3.03.0 1.01.0 %% 6.76.7 1.81.8 %%
TOTAL SALES TOTAL SALES (reported)(reported) 82.482.4 %% 82.982.9 %%
Sales by geographic regionsSales by geographic regions (reported)(reported)
From sales From sales to recurring operating incometo recurring operating income
(in € millions)(in € millions)First half
2005/2006First half 2006/2007
ChangeChange
Sales Sales (reported)(reported) 303.8303.8 365.7365.7 + 20.4 %+ 20.4 %
Operating expensesOperating expenses - 255.2- 255.2 - 287.5- 287.5
Recurring operating income Recurring operating income (reported) (reported) 48.648.6 78.278.2 + 60.9 %+ 60.9 %
Currency translation impact ($ and £)Currency translation impact ($ and £) 2.92.9
Changes in consolidation scopeChanges in consolidation scope
RECURRING OPERATING INCOME RECURRING OPERATING INCOME (like-for-like)(like-for-like)
48.648.6 81.181.1 + 66.9 %+ 66.9 %
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007 ChangeChange
FITCHFITCH GROUP GROUP 54.754.7 84.384.3 ++ 54.1 %54.1 %
Fitch RatingsFitch Ratings 74.174.1 101.101.00 ++ 36.3 %36.3 %
AlgorithmicsAlgorithmics - 19.4- 19.4 - 16.7- 16.7 ++ 13.9 %13.9 %
Other (Parent company)Other (Parent company) - 6.1- 6.1 - 6.1- 6.1
RECURRING OPERATING RECURRING OPERATING INCOME INCOME (reported)(reported)
48.648.6 78.278.2 ++ 60.9 %60.9 %
Recurring operating income by companyRecurring operating income by company(reported)(reported)
Recurring operating income by company Recurring operating income by company (like-for-like)(like-for-like)
Operating margin (ROI / Sales)Operating margin (ROI / Sales) 16.0 %16.0 % 21.2 %21.2 %
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007 ChangeChange
FITCHFITCH GROUP GROUP 54.754.7 87.287.2 ++ 59.4 %59.4 %
Fitch RatingsFitch Ratings 74. 374. 3 105.3105.3 ++ 41.7 %41.7 %
AlgorithmicsAlgorithmics - 19.6- 19.6 - 18.1- 18.1 ++ 7.7 %7.7 %
Other (Parent company)Other (Parent company) - 6.1- 6.1 - 6.1- 6.1
RECURRING OPERATING RECURRING OPERATING INCOME INCOME (like-for-like)(like-for-like)
48.648.6 81.181.1 ++ 66.9 %66.9 %
From recurring operating incomeFrom recurring operating income to operating result to operating result (reported)(reported)
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007
ChangeChange
Recurring operating income Recurring operating income (reported)(reported)
48.648.6 78.278.2 + 60.9 %+ 60.9 %
Other operating income and Other operating income and expenseexpense
6.86.8 26.426.4
OPERATING RESULTOPERATING RESULT(reported)(reported)
55.455.4 104.6104.6 + 88.8 %+ 88.8 %
From operating result to net earningsFrom operating result to net earnings (reported)(reported)
(in € millions)(in € millions) First half 2005/2006
First half 2006/2007
ChangeChange
Operating result Operating result (reported)(reported)
55.455.4 104.6104.6 + 88.8 %+ 88.8 %
Interest expenseInterest expense - 6.0- 6.0 8.18.1
Other financial income / (expense)Other financial income / (expense) 7.17.1 - 3.6- 3.6
TaxesTaxes - 13.8- 13.8 - 47.0- 47.0
Equity in net earnings of affiliated companiesEquity in net earnings of affiliated companies 0.50.5 0.30.3
Minority interestsMinority interests - 1.6- 1.6 - 8.5- 8.5
NET EARNINGS Groupe shareNET EARNINGS Groupe share((except Net earnings from discontinued operationsexcept Net earnings from discontinued operations))
41.641.6 53.953.9 + 29.6 + 29.6 %%
Net earnings from disposals Net earnings from disposals (20 % Fitch Group)(20 % Fitch Group)
384.1384.1
Net earnings from discontinued operations, Net earnings from discontinued operations, and in process of disposaland in process of disposal
78.478.4
NET EARNINGS NET EARNINGS Groupe share (reported) Groupe share (reported)
504.1504.1 53.953.9
Cash and cash equivalents / (net debt) by companyCash and cash equivalents / (net debt) by company
(in € millions)(in € millions) 09/ 30/ 2006 03/ 31/ 2007
Fitch GroupFitch Group - 273- 273 - 231- 231
Parent companyParent company + 413+ 413 + 367+ 367
Net cash position - FimalacNet cash position - Fimalac + 140+ 140 + 136+ 136
Fimalac share performance vs. Fimalac share performance vs. CAC 40CAC 40 and and SBF 120SBF 120 Decembre 1992 to May 10, 2007Decembre 1992 to May 10, 2007
CAC 40CAC 40
301301
FIMALACFIMALAC
1 4351 435
SBF 120SBF 120
337337
100
300
500
700
900
1100
1300
1500
1700
Dec-92
Dec-92
Dec-93
Dec-93
Dec-94
Dec-94
Dec-95
Dec-95
Dec-96
Dec-96
Dec-97
Dec-97
Dec-98
Dec-98
Dec-99
Dec-99
Dec-00
Dec-00
Dec-01
Dec-01
Dec-02
Dec-02
Dec-03
Dec-03
Dec-04
Dec-04
Dec-05
Dec-05
Dec-06
Dec-06
May
10-07
May
10-07
Fimalac share performance vs Fimalac share performance vs CAC 40 & SBF 120CAC 40 & SBF 120
January 2006 to May 10, 2007January 2006 to May 10, 2007
CAC 40CAC 40
124124
FIMALACFIMALAC
144144
SBF 120SBF 120
125125
100
105
110
115
120
125
130
135
140
145
150
Jan-
06
Jan-
06Fe
b-06
Feb-
06M
ar-0
6
Mar
-06
Apr-0
6
Apr-0
6M
ay -0
6
May
-06
Jun-
06
Jun-
06Ju
l-06
Jul-0
6Aug
-06
Aug-0
6Se
pt-0
6
Sept
-06
Oct-06
Oct-06
Nov-0
6
Nov-0
6Dec
-06
Dec-0
6Ja
n-07
Jan-
07Fe
b-07
Feb-
07M
ar-0
7
Mar
-07
Apr-0
7
Apr-0
7M
ay 1
0-07
May
10-
07
"Total Shareholder Return" over 10 years "Total Shareholder Return" over 10 years SBF120 companiesSBF120 companies
Source JCF Group
Ranking
1 Beneteau 3 582,8% 43,4%
2 Vallourec 2 619,6% 39,1%
3 Eiffage 1 819,3% 34,4%
4 CFF Recycling 1 545,1% 32,3%
5 Vinci 1 452,7% 31,6%
6 Areva 1 213,2% 29,4%
7 Unibail 1 090,0% 28,1%
8 Bouygues 965,5% 26,7%
9 Wendel Investissement 798,7% 24,6%
10 Klepierre 792,7% 24,5%
11 Societe Generale 737,8% 23,7%
12 Maurel et Prom 732,2% 23,6%
13 Fimalac SA 616,8% 21,8%
14 Ciments Français 588,8% 21,3%
15 BNP Paribas 543,4% 20,5%
TSR Over 10 yearsOver 10 years AnnualizedAnnualized in %in % in % in %
16
HistoryHistory
Fitch Group StructureFitch Group Structure
80% 20%
100%
100%
100%
Fitch Group Fitch Group Revenue Growth (fiscal year)Revenue Growth (fiscal year)
$43
$156 $169$222
$305$356
$455
$511
$693
$483
$565
$366
$474
0
100
200
300
400
500
600
700
800
1997 1998 1999 2000 2001 2002 2003 2004 2005 NineMonthsEndedSept 05
NineMonthsEndedSept 06
1H06 1H07
Fiscal year-end December 31Fiscal year-end September 30
(in
US
$ m
illi
ons)
Fitch Group Fitch Group Sales to Operating IncomeSales to Operating Income
(in US $ millions) 1H1H2005/2006 2005/2006
1H 1H 2006/20072006/2007 % Change% Change
RevenueRevenue 365.9365.9 473.6473.6 + 29.4%+ 29.4%
Personnel costsPersonnel costs 190.8190.8 231.6231.6 + 21.4 %+ 21.4 %
External expensesExternal expenses 59.659.6 75.175.1 + 26.0 %+ 26.0 %
Total chargesTotal charges 250.4250.4 306.7306.7 + 22.5 %+ 22.5 %
EBITDAEBITDA 115.5115.5 166.9166.9 + 44.5 %+ 44.5 %
Profit sharing planProfit sharing plan 31.931.9 37.937.9 + 18.8 %+ 18.8 %
DepreciationDepreciation 8.88.8 8.58.5 - 3.4 %- 3.4 %
Intellectual propertyIntellectual property 9.19.1 11.411.4 + 25.3 %+ 25.3 %
Operating IncomeOperating Income 65.765.7 109.1109.1 + 66.1 %+ 66.1 %
Key Figures by CompanyKey Figures by Company
(in US $ millions) 1H 1H 2005/20062005/2006
1H 1H 2006/ 20072006/ 2007
% % ChangeChange
Revenue Revenue FITCH GROUPFITCH GROUP 365.9365.9 473.6473.6 + 29.4 %+ 29.4 %
FitchRatingsFitchRatings 308.0308.0 405.7405.7 + 31.7 %+ 31.7 %
AlgorithmicsAlgorithmics 58.658.6 70.170.1 + 19.6 %+ 19.6 %
Intercompany revenueIntercompany revenue-0.7-0.7 -2.2-2.2
EBITDA FITCH GROUPEBITDA FITCH GROUP 115.5115.5 166.9166.9 + 44.5 %+ 44.5 %
FitchRatingsFitchRatings 128.1128.1 175.1175.1 + 36.7 %+ 36.7 %
AlgorithmicsAlgorithmics - 12.6- 12.6 - 8.2- 8.2
Operating Income FITCH GROUPOperating Income FITCH GROUP 65.765.7 109.1109.1 + 66.1 %+ 66.1 %
FitchRatingsFitchRatings 89.289.2 130.8130.8 + 46.6 %+ 46.6 %
AlgorithmicsAlgorithmics - 23.5- 23.5 - 21.7- 21.7
22
Fitch Ratings Fitch Ratings Revenue Growth (fiscal year)Revenue Growth (fiscal year)
(in
US
$ m
illi
ons)
$305$353
$448
$502
$594
$419
$481
$308
$406
0
100
200
300
400
500
600
700
2001 2002 2003 2004 2005 NineMonthsEnded
Sept 05
NineMonthsEnded
Sept 06
1H06 1H07
Year-end December 31Year-end March 31
Fitch Ratings Fitch Ratings Revenue Growth (pro-forma)Revenue Growth (pro-forma)
(in
US
$ m
illi
ons)
$305$353
$448$502
$594
$703
$308
$406
0
100
200
300
400
500
600
700
800
2001 2002 2003 2004 2005 2006* 1H06 1H07
*Calendar year 2006 presented proforma.
Six Year CAGR = 18%
Year-end December 31Year-end September 30
$3.9
$5.0 $5.3
$7.0
$2.0
$6.2
0
2
4
6
8
2002 2003 2004 2005 2006 Jan-Mar 07
Global Debt Issuance Global Debt Issuance ($ Volume)($ Volume)
Source: Thomson Financial Source: Thomson Financial
(US
$ tr
illi
ons)
Quarterly Global Debt IssuanceQuarterly Global Debt Issuance
Source: Thomson Financial Source: Thomson Financial
$25
$43 $42$48 $50
$69
$108
$125
$139
$178
$158
0
20
40
60
80
100
120
140
160
180
200
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
$72
$52
$25
$43 $42$48 $50
$69
$108
$125
$139
$178
$158
0
20
40
60
80
100
120
140
160
180
200
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07
$72
$52
Global CDO Market IssuanceGlobal CDO Market Issuance
CDO Market Issuance includes Cash Flow and Hybrid, Synthetic Funded and Market Value CDOs. CDO Market Issuance includes Cash Flow and Hybrid, Synthetic Funded and Market Value CDOs. Unfunded Synthetic Tranches are not included. Unfunded Synthetic Tranches are not included.
(US
$ b
illi
ons)
Source: Securities Industry and Financial Markets AssociationSource: Securities Industry and Financial Markets Association
Fitch Ratings Fitch Ratings Market Share Market Share
53%
89%
65%
53%
89%
67%
0%
20%
40%
60%
80%
100%
Structured Finance Financial Institutions Non-Financial Corporates
Twelve Months ended Dec 05 Twelve Months ended Dec 06
53%
89%
65%
53%
89%
67%
0%
20%
40%
60%
80%
100%
Structured Finance Financial Institutions Non-Financial Corporates
Twelve Months ended Dec 05 Twelve Months ended Dec 06
Market ShareMarket Share by Dollar Volumeby Dollar Volume
Fitch Ratings Fitch Ratings Revenue by SegmentRevenue by Segment
(in US $ millions) 1H 1H 2005/20062005/2006
1H 1H
2006/2002006/20077
% Change % Change
Structured FinanceStructured Finance 162.8162.8 215.0215.0 + 32.1%+ 32.1%
Corporate FinanceCorporate Finance 110.0110.0 147.4147.4 + 34.0%+ 34.0%
Subscriptions /TrainingSubscriptions /Training 35.235.2 43.343.3 + 23.0%+ 23.0%
TOTAL FITCH RATINGSTOTAL FITCH RATINGS 308.0308.0 405.7405.7 + 31.7%+ 31.7%
Fitch Ratings Fitch Ratings Revenue by RegionRevenue by Region
(in US $ millions) 1H 1H 2005/20062005/2006
1H 1H 2006/2002006/200
77
% Change % Change
North AmericaNorth America 174.1174.1 216.4216.4 + 24.3%+ 24.3%
Europe, Middle East & Europe, Middle East & AfricaAfrica
110.7110.7 159.4159.4 + 44.0%+ 44.0%
Latin AmericaLatin America 12.612.6 15.515.5 + 23.0%+ 23.0%
Asia PacificAsia Pacific 10.610.6 14.414.4 + 35.8%+ 35.8%
TOTAL FITCH RATINGSTOTAL FITCH RATINGS 308.0308.0 405.7405.7 + 31.7%+ 31.7%
Fitch Ratings Fitch Ratings EBITDA and Operating Income EBITDA and Operating Income
(in US $ millions) 1H 1H 2005/20062005/2006
1H 1H 2006/20072006/2007
% Change% Change
Revenue Revenue 308.0308.0 405.7405.7 + 31.7%+ 31.7%
EBITDA EBITDA 128.1128.1 175.1175.1 + 36.7 %+ 36.7 %
EBITDA MarginEBITDA Margin 41.6%41.6% 43.2%43.2%
Profit sharing planProfit sharing plan 31.831.8 37.737.7 + 18.6 %+ 18.6 %
Depreciation & AmortizationDepreciation & Amortization 7.17.1 6.66.6 - 7.0 %- 7.0 %
Operating Income Operating Income 89.289.2 130.8130.8 + 46.6 %+ 46.6 %
Operating Income MarginOperating Income Margin 29.0%29.0% 32.2%32.2%
Fitch Ratings Fitch Ratings Investment in Human CapitalInvestment in Human Capital
2 0852 105
1 827
1 617
1 4471 350
0
300
600
900
1 200
1 500
1 800
2 100
12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 03/31/07
2 0852 105
1 827
1 617
1 4471 350
0
300
600
900
1 200
1 500
1 800
2 100
12/31/02 12/31/03 12/31/04 12/31/05 12/31/06 03/31/07
HeadcountHeadcount
Investment in Korea RatingsInvestment in Korea Ratings
Founded in 1983, Korea Ratings is the largest domestic Founded in 1983, Korea Ratings is the largest domestic rating agency in Korearating agency in Korea Rates 386 Korean companies and has a strong presence in structured
finance Employs 170 people with annual revenues in 2006 of $34m.
Long successful working relationship Long successful working relationship 1999 – Strategic alliance between Fitch Ratings and Korea Ratings 2001 – Fitch Ratings makes investment in 8% of Korea Ratings 2007 – Fitch Ratings increases investment to 53% of Korea Ratings for
over $60m
Korean government is committed to developing a long-term Korean government is committed to developing a long-term bond marketbond market
Areas of Focus in 1H 2007 Areas of Focus in 1H 2007
Structured Finance Structured Finance
Credit concerns in Sub-prime Markets and CMBS Release and implementation of new models:
ResiLogic, new US RMBS model New US CMBS model
Derivative Fitch Continued focus on EMEA expansion and emerging
markets securitization growth
Areas of Focus in 1H 2007 Areas of Focus in 1H 2007 (cont’d)(cont’d)
Corporate Finance Corporate Finance Continued expansion into rapidly growing new markets
Corporate loan ratings Emerging markets Covered bonds
Continued expansion in existing markets The high yield and loan markets
Introduction of new analytical tools and procedures including new quantitative models and analytics
Focused effort at servicing the burgeoning infrastructure financing market
Regulatory UpdateRegulatory Update
GlobalGlobal Fitch has received ECAI (External Credit Assessment Institution) Fitch has received ECAI (External Credit Assessment Institution)
recognition in all markets for which a decision on international rating recognition in all markets for which a decision on international rating agencies has been taken.agencies has been taken.
IOSCO (International Organization of Securities Commissions) IOSCO (International Organization of Securities Commissions) taskforce published a draft report with positive comments regarding taskforce published a draft report with positive comments regarding codes of conduct adopted by global rating agencies, now reviewing codes of conduct adopted by global rating agencies, now reviewing the role of rating agencies in the development of structured finance the role of rating agencies in the development of structured finance transactions. transactions.
EMEA EMEA Review of implementation of codes of conduct by Committee of Review of implementation of codes of conduct by Committee of
European Securities Regulators (CESR) returned positive feedback European Securities Regulators (CESR) returned positive feedback on the quality of implementation of agency codes, however concerns on the quality of implementation of agency codes, however concerns were noted with ancillary services, disclosure of initiation and were noted with ancillary services, disclosure of initiation and participation, and fee negotiation policies. participation, and fee negotiation policies.
Regulatory UpdateRegulatory Update (cont’d)(cont’d)
Asia/PacificAsia/Pacific The Japanese Financial Services Authority (FSA) plans to bolster The Japanese Financial Services Authority (FSA) plans to bolster
oversight of credit rating agencies to improve the quality of oversight of credit rating agencies to improve the quality of information provided to investors. The FSA will designate credit rating information provided to investors. The FSA will designate credit rating agencies as investment information providers to the marks and draft agencies as investment information providers to the marks and draft new rules for them. new rules for them.
United StatesUnited States The Credit Rating Agency Reform Act of 2006 was signed into law on The Credit Rating Agency Reform Act of 2006 was signed into law on
September 29, 2006.September 29, 2006. SEC given authority to implement registration, recordkeeping, SEC given authority to implement registration, recordkeeping,
financial reporting, and oversight rules with respect to registered credit financial reporting, and oversight rules with respect to registered credit rating agencies.rating agencies.
SEC published proposed rules which received public comment by Fitch SEC published proposed rules which received public comment by Fitch and other participants in the industry.and other participants in the industry.
Final rules to be issued no later than June, 2007.Final rules to be issued no later than June, 2007.
Fitch Ratings Fitch Ratings 2007 Goals 2007 Goals
Create and maintain reputation for highest quality Create and maintain reputation for highest quality ratings and research ratings and research
Maintain and grow market share across all key Maintain and grow market share across all key segments and regionssegments and regions
Enhance pricing flexibilityEnhance pricing flexibility
Continue consistent long-term investment planContinue consistent long-term investment plan
Fitch Ratings secular revenue growth: 10Fitch Ratings secular revenue growth: 10––12%12%
US: 8–10%
International: 15–20%
39
IntroductionIntroduction
Algorithmics is a leading provider in the development Algorithmics is a leading provider in the development
and delivery of enterprise risk solutions that enable and delivery of enterprise risk solutions that enable
growth, innovation and the efficient use of risk capital. growth, innovation and the efficient use of risk capital.
Financial organizations from around the world rely on Financial organizations from around the world rely on
our software, content,our software, content, delivery and advisory services to delivery and advisory services to
make risk aware business decisions and meet make risk aware business decisions and meet
regulatory requirements.regulatory requirements.
Revenue by RegionRevenue by Region
(in (in US$ millions)US$ millions) 1H 1H 2005/20062005/2006
1H 1H 2006/20072006/2007
% Change % Change
North AmericaNorth America 17.717.7 18.718.7 + 5.6%+ 5.6%
Europe, Middle East & AfricaEurope, Middle East & Africa 31.131.1 36.236.2 + 16.4%+ 16.4%
Latin AmericaLatin America 2.82.8 3.03.0 + 7.1%+ 7.1%
Asia PacificAsia Pacific 7.07.0 12.212.2 + 74.3%+ 74.3%
TOTAL ALGORITHMICSTOTAL ALGORITHMICS 58.658.6 70.170.1 + 19.6%+ 19.6%
(1) Includes inter-company revenue of $0.7M(1) Includes inter-company revenue of $0.7M
(2) Includes inter-company revenue of $2.2M(2) Includes inter-company revenue of $2.2M
(1)(1) (2)(2)
Pro-forma EBITDA &Pro-forma EBITDA &Operating Income Operating Income
(in (in millions of US$)millions of US$) 1H 1H 2005/20062005/2006
1H 1H 2006/20072006/2007
% change% change
RevenueRevenue 58.658.6 70.170.1 + 19.6%+ 19.6%
EBITDAEBITDA - 12.6- 12.6 - 8.2- 8.2
Profit sharing planProfit sharing plan 0.10.1 0.20.2
DepreciationDepreciation 1.71.7 1.91.9
Intellectual propertyIntellectual property 9.19.1 11.411.4
Current Operating IncomeCurrent Operating Income - 23.5- 23.5 - 21.7- 21.7
(1) Includes inter-company revenue of $0.7M(1) Includes inter-company revenue of $0.7M
(2) Includes inter-company revenue of $2.2M(2) Includes inter-company revenue of $2.2M
(1)(1) (2)(2)
369 software solution clients (39 net new in 1H) 369 software solution clients (39 net new in 1H)
122 data and content clients (2 net new in 1H)122 data and content clients (2 net new in 1H)
69 of the world’s top 100 banks 69 of the world’s top 100 banks 11
726 professionals in 19 global offices726 professionals in 19 global offices
1 1 Top 100 banks according to “The Banker”. Changed from 70 in September 2006 to 69 in March 2007 as a result of revisions to the top 100 list.
Highlights Highlights
GrowthGrowth 51 new license orders in 1H 2006/200751 new license orders in 1H 2006/2007
19.6 % revenue growth vs. 1H 2005/2006 (comparable numbers)19.6 % revenue growth vs. 1H 2005/2006 (comparable numbers)
Investment in Human CapitalInvestment in Human Capital Maintaining current level of product development Maintaining current level of product development
Expanding services, sales and marketingExpanding services, sales and marketing
Media and Analyst Recognition Media and Analyst Recognition Risk Technology rankings: #1 in 6 categories (December 2006)Risk Technology rankings: #1 in 6 categories (December 2006)
Op Risk and Compliance Magazine rankings: #1 for Regulatory Op Risk and Compliance Magazine rankings: #1 for Regulatory and Economic Capital (May 2007)and Economic Capital (May 2007)
Recent AchievementsRecent Achievements
SolutionsSolutions End Sept. 2006End Sept. 2006 End March 2007End March 2007
Credit and capitalCredit and capital
Market riskMarket risk
Operational risk Operational risk
Collateral managementCollateral management
108108
128128
8989
6868
117117
151151
9393
7373
Client GrowthClient Growth
Executing our Growth Executing our Growth Strategy for 2006/2007Strategy for 2006/2007
Expanding sales and services to support revenue growthExpanding sales and services to support revenue growth Advisory mandate for top Japanese bank on Basel II IRB strategyAdvisory mandate for top Japanese bank on Basel II IRB strategy
Successfully completed major Basel II implementations for global banks Successfully completed major Basel II implementations for global banks Establishing presence in new geographical marketsEstablishing presence in new geographical markets
Enterprise risk solutions for major banks in Turkey and the GulfEnterprise risk solutions for major banks in Turkey and the Gulf
Transforming the credit related business processes of a leading Asian bankTransforming the credit related business processes of a leading Asian bank Investing in managed service solutions for asset managers and hedge Investing in managed service solutions for asset managers and hedge
fundsfundsClient wins include a large commodities broker dealer, several primeClient wins include a large commodities broker dealer, several prime
brokers, premier asset managers and a global multi-strategy fundbrokers, premier asset managers and a global multi-strategy fund Developing broader risk solution for the insurance industryDeveloping broader risk solution for the insurance industry
Integrated management of assets and liabilities for global insurers Integrated management of assets and liabilities for global insurers Continued focus on core solutionsContinued focus on core solutions
Leading banks in EMEA and Asia are leveraging and broadening their Leading banks in EMEA and Asia are leveraging and broadening their
usage of our solutionsusage of our solutions
Outlook for 2006/2007 Outlook for 2006/2007 Market Drivers Market Drivers
Adoption of ‘risk aware’ business applications in financial servicesAdoption of ‘risk aware’ business applications in financial services
Large regional banks in EMEA – full credit approval solution
Large NA asset manager – one solution for portfolio and risk managers
Increasingly complex financial markets and products which require Increasingly complex financial markets and products which require more sophisticated toolsmore sophisticated tools
Valuation and hedging of Variable Annuity Products for top NA insurer Regulation for banks (more countries adopting Basel II), asset Regulation for banks (more countries adopting Basel II), asset
managers and insurance companies (e.g. Solvency II)managers and insurance companies (e.g. Solvency II)Leading bank won FST Compliance Project of the Year Award (Basel II)
Full enterprise risk management and Basel II solutions for regional banks Financial institutions’ increasing use of external vendors for risk Financial institutions’ increasing use of external vendors for risk
solutionssolutions
Integrated value based management for large regional banks in Integrated value based management for large regional banks in EMEAEMEA
Adoption of our solutions in mission-critical trading environmentsAdoption of our solutions in mission-critical trading environments
Algorithmics Algorithmics in the News 1H 2006/7in the News 1H 2006/7
• Pension Insurance Corporation Pension Insurance Corporation Selects Risk Platform from Algorithmics to Manage Assets and Liabilities
• Danske BankDanske Bank Completes First Phase of Economic Capital Project with Algorithmics
• Algorithmics Awarded PatentAlgorithmics Awarded Patent for Innovative Portfolio Performance Measurement Methodology
• CannizaroCannizaro Signs on to Algorithmics' Leading-Edge Managed Service Platform
• Algorithmics Hosts Credit Risk Management Forum with the Chinese Chinese Banking Regulatory CommissionBanking Regulatory Commission
• Marex FinancialMarex Financial Live with a Managed Risk Service Hosted by Algorithmics
• TD Securities Prime BrokerageTD Securities Prime Brokerage Now Live with a Managed Risk Service Hosted by Algorithmics
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AppendixAppendix
Fitch RatingsFitch RatingsGlossary of TermsGlossary of Terms
Asset Backed Security (ABS)Asset Backed Security (ABS) - - A financial security backed by a loan, lease or A financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities.receivables against assets other than real estate and mortgage-backed securities.
Commercial Mortgage Backed Security (CMBS)Commercial Mortgage Backed Security (CMBS) - - A type of mortgage-A type of mortgage-backed security that is secured by the loan on a commercial property. backed security that is secured by the loan on a commercial property.
Residential Mortgage Backed Security (RMBS)Residential Mortgage Backed Security (RMBS) - - A type of A type of security whose cash flows come from residential debt such as mortgages, home-security whose cash flows come from residential debt such as mortgages, home-equity loans and sub-prime mortgages.equity loans and sub-prime mortgages.
Sub-prime Mortgage - Sub-prime Mortgage - LLoans made to borrowers unable to qualify under oans made to borrowers unable to qualify under traditional, more stringent criteria due to a limited or blemished credit history traditional, more stringent criteria due to a limited or blemished credit history and limited capacity for repayment. Because sub-prime borrowers are and limited capacity for repayment. Because sub-prime borrowers are considered at higher risk to default, sub-prime lenders require a higher interest considered at higher risk to default, sub-prime lenders require a higher interest rate and fees than they would require from a traditional borrower with good rate and fees than they would require from a traditional borrower with good credit terms.credit terms.
Covered BondCovered Bond – A – A Covered bond is a security issued by financial institutions, Covered bond is a security issued by financial institutions, secured against pools of mortgages or public-sector loans. secured against pools of mortgages or public-sector loans.
Fitch RatingsFitch RatingsGlossary of TermsGlossary of Terms
Collateralized Debt Obligation (CDO) Collateralized Debt Obligation (CDO) - - An investment-grade security backed by a An investment-grade security backed by a pool of bonds, loans and other assets. A CDO is unique in that it is comprised of pool of bonds, loans and other assets. A CDO is unique in that it is comprised of different tranches, each with a different maturity and risk associated with it. different tranches, each with a different maturity and risk associated with it.
Cash Flow CDO – Cash Flow CDO – A CDOA CDO structured to pay off liabilities with the interest and structured to pay off liabilities with the interest and principal payments (cash flows) of its collateral. These expose investors to credit principal payments (cash flows) of its collateral. These expose investors to credit risk by actually holding collateral that is subject to default. risk by actually holding collateral that is subject to default.
Synthetic CDOSynthetic CDO – A CDO that sells credit protection via credit default swaps – A CDO that sells credit protection via credit default swaps rather than cash assets. Synthetic CDOs use credit default swaps to synthetically rather than cash assets. Synthetic CDOs use credit default swaps to synthetically replicate a cash flow CDO.replicate a cash flow CDO.
Hybrid CDO - Hybrid CDO - A CDO that utilizes the funding structures of both cash and A CDO that utilizes the funding structures of both cash and synthetic CDOs.synthetic CDOs.
Market Value CDOMarket Value CDO – A CDO structured to pay off liabilities by generating cash – A CDO structured to pay off liabilities by generating cash from trading assets and from interest on invested assets.from trading assets and from interest on invested assets.
Fitch RatingsFitch RatingsGlossary of Terms (cont’d)Glossary of Terms (cont’d)
RAP CD RAP CD - - Fitch’s Risk Analytics Platform for Credit Derivatives is a breakthrough global Fitch’s Risk Analytics Platform for Credit Derivatives is a breakthrough global market-risk assessment service that helps investors understand how their CDO investments market-risk assessment service that helps investors understand how their CDO investments trade by tracing price movements back to the changes in the CDOs underlying portfolio from trade by tracing price movements back to the changes in the CDOs underlying portfolio from which they stem. which they stem.
VECTOR Default Model (VECTOR)VECTOR Default Model (VECTOR) - - Fitch Ratings’ main quantitative tool for evaluating Fitch Ratings’ main quantitative tool for evaluating default risk in credit portfolios backing CDOs. The main outputs of VECTOR are the rating default risk in credit portfolios backing CDOs. The main outputs of VECTOR are the rating default rate, rating loss rate and the rating recovery rate corresponding to each rating tier within default rate, rating loss rate and the rating recovery rate corresponding to each rating tier within a security. a security.
MatrixMatrix – Fitch Ratings’ financial guarantee capital model which provides a stochastic – Fitch Ratings’ financial guarantee capital model which provides a stochastic assessment of a financial guarantor’s capital adequacy position. assessment of a financial guarantor’s capital adequacy position.